Fundamentals & valuation
What is Debt-to-equity ratio?
Also called: D/E ratio
Hinglish mein padhein: Debt-to-equity ratio kya hota hai?
Debt-to-equity divides a company's borrowings by its shareholders' equity. It shows how much the business relies on debt.
Below 0.5 is usually comfortable for non-financial companies; high ratios raise risk when interest rates rise or profits fall.
The ratio is not meaningful for banks and NBFCs, whose business is borrowing and lending.
Related terms
- ROE (Return on equity)ROE is net profit divided by shareholders' equity. It shows how much profit the company makes on the money shareholders have invested.
- ROCE (Return on capital employed)ROCE measures operating profit (EBIT) as a percentage of all capital used in the business — equity plus debt.
- Balance sheetThe balance sheet lists what a company owns (assets), what it owes (liabilities) and the shareholders' equity at a point in time.